The human and financial costs are severe. Cuts in America cost between US$25 and US$180 billion per annum. Indirect costs, including related insurance claims, are up to five times higher. Against this, electricity demand continues to intensify. Consumer addiction to electronic devices grows, while fossil fuels that supply energy diminish.

Hugh Byrd, Professor of Architecture at Lincoln University, has 30 years’ experience in Malaysia, New Zealand and the UK working on international energy policy and powering mega cities. He says businesses must consider generating their own electricity. The “decentralized” generation of electricity is the best way to pre-empt catastrophe. Business gain energy security and a potential income when excess generation is sold back to the grid.

But though academia may realize the risks, the corporate world has been slower to wake up. “The business world is probably not aware of the dangers, at least until it is too late and even then, it is soon forgotten,” he said. “One striking case was in Auckland, in New Zealand, when all the offices in the central business district were shut down for five weeks due to a blackout. That should have been a lesson of the dangers, but more recent blackouts have shown that little has been learnt.”

It cost Auckland NZD$120 million (US$93 million) to restore the power supply, NZD$110 million (US$85 million) to protect the new cables, and a further NZD$70 million (US$54 million) on compensation claims. The commercial imperative for more sustainable power is clearly there. Byrd describes this and other scenarios in his compelling book Energy and the City: The Technology and Sociology of Power (Failure).

He argues that electrical power is not merely infrastructure, but “critical” infrastructure according to the definition supplied by the International Risk Governance Council’s (IRGC) of “large-scale, human-built systems that supply continual services central to society’s functioning”.

The spread of global blackouts and their impacts

There are numerous examples of blackouts globally. In 2010, Venezuela’s president extended the national Easter holiday period to reduce the country’s electricity demand. The business community had warned of a loss of production and food supply. In South Africa, in January 2008, a blackout shut the three largest gold mines and two biggest platinum mines with international consequences. Within minutes, the global commodities price rose by 5%.

More examples underline the urgency for action. Blackouts were so frequent in Kenya in 2010 that Nairobi’s restaurants planned menus of cold food in the event of an emergency. In the same year, the Chinese authorities imposed electricity rationing to meet efficiency targets in Hebei Province. On occasions, the consequences have been tragic. In Pakistan, load-shedding during a heat wave resulted in 12 hours a day without electricity for a period of weeks. Hundreds of people died of food poisoning from eating rotten food out of their powerless freezers.

“Investment in energy saving has been understandably slow in the corporate world because it is a relatively low cost compared with labour,” said Byrd. “But the cost of not having energy can be catastrophic. There are huge opportunities to both increase energy security and reduce carbon emissions by using decentralized generation.”

The business world must meet its CSR obligation to keep the lights on, he says. “Apart from obvious self-interest, there is an ethical case since society is now dependent on an uninterrupted supply of electricity for basic needs of security, food and health,” Byrd said.

Byrd says more sustainable businesses will reduce dependency on centralized energy supplies. It could also lower prices for consumers. “The oligopolies of the power industry need to be challenged and that can only be done by competition,” he said. “Corporates should be generating their own power. This helps overcome the other technological problems that will grow in years to come, including power supply espionage and increased demand due to electric vehicles and air-conditioning.”

The electricity vs fuel nexus

In 2008, the world’s population was 6.7 billion. This is predicted to rise to 8.5 billion by 2035. In the same period, demand for electricity will grow by 80%. This will require an additional 5,900 gigawatts of power.

The World Bank acknowledges that demand is growing. But it fears higher global fuel costs, particularly for oil, will mean a smaller proportion of the world’s people can afford electricity in 2030. It raises questions about social justice, energy poverty, and global security. Greenpeace are demanding a European supergrid that relies heavily on renewable sources. It estimates a cost of €209 billion per annum until 2050. The future may not come cheap.

Byrd’s study quotes David Crane, the CEO of NRG Energy, on the issues: “It is not for lack of effort or money, but rather because the American power industry deploys technology designed in the 1800s to manage a system of wires and wooden poles that is ill-suited to the weather challenges of the 21st century.”

Byrd says these types of archaic practices cannot continue. Corporates need to take a long, hard look at their energy policies and consider what is good for the planet. It could well turn out to be good for business, too.

Giles Crosse is a journalist with specialist interest in the developing world, corporate social responsibility, and technical solutions to environmental challenges. His career has taken him to exotic destinations, such as the Peruvian Amazon, and Shallow Waters in Cambodia. He is looking forward to an inclusive planet, where greener business, happier people and better managed resources co-exist.